[miningmx] — AQUARIUS Platinum’s financials all but confirmed the bleak situation
CEO Stuart Murray previously warned the company was facing, yet still achieved to rip
another 10% from the group’s share price during early morning trade on Wednesday.
The group posted a headline loss of $154m (US 32.88 cents) for the year to end-June,
down from positive earnings of $143m during the same period in 2011. This was the
result of a 29% decrease in revenue to $486m, cash flow down 85% to $26m and
Ebitda lower by 86% to $29m.
Operationally, its production decreased by 14% to 411,398 PGM ounces as the
voluntary closure of some South African operations took effect. While the average
rand basket price it received for production stayed flat year-on-year at just over
R10,300 per PGM ounce, its on-mine unit cash costs in South Africa increased by 39%
in rand terms.
Aquarius warned about this dire outlook in a trading update it issued in July, yet
investors took flight from the stock with the share trading down 10% at R4.30 during
early morning trade, recovering somewhat to R4.52 by 10:00. These are annual lows
for a company which traded at around R34/share a year ago.
Kroondal, the company’s flagship and sole operating mine in South Africa – Aquarius
had already placed Everest and Marikana on care and maintenance earlier in the year
– recorded a negative cash margin as production continued to be negatively impacted
by the implementation of a new hanging-wall support regime.
Aquarius said the mine would trend back to full production before the end of the
calendar year, although an unlawful strike and violence stemming from continuing
tensions between labour union rivals NUM and Amcu, as well as the group’s decision
to ditch its mining contractor, have further disrupted operations in the recent past.
The group’s only profitable operation for the year was Mimosa, its 50/50 joint venture
with Impala Platinum in Zimbabwe, which operated at a positive cash margin of 47%,
albeit down from 57%.
Lower platinum prices coupled with higher costs and royalty payments took their toll
on margins. One issue which Aquarius seemingly did resolve was the intermittent
disruptions caused by electricity load-shedding during the second and third quarter.
The group said that following an agreement in March between Mimosa and
Zimbabwe’s power utility, Zesa, guaranteeing uninterrupted power supply of 20MW
for the next five years, Mimosa had experienced no issues with electricity supply.
Commenting on the group’s results, Murray said company specific issues, a significant
drop in the rand basket price coupled with rising input costs, poor labour relations and
safety stoppages all combined to deliver an “unfortunate’ operational and financial
outcome for Aquarius.
“Whilst some of the issues are company specific, the general operating environment
combined with the poor pricing conditions place the South African PGM sector under
real pressure,’ Murray said.
“Aquarius has felt these impacts, but has swiftly resolved to conserve cash and
protect the value of its in-the-ground reserves and resources by placing Marikana and
Everest under care and maintenance.’
Analysts at Numis Securities noted Aquarius’s cash-in-hand of $180m would be
sufficient to carry the group through the current slowdown. In a note to clients, the
brokerage said the results were symptomatic of a weak margin platinum environment
in “desperate need of a structural change’.
“No dividend and no real surprise,’ Numis said.
